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Constructing housing for the poor without destroying their communities

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The Pradhan Mantri Awas Yojana aims to achieve housing for all by 2022. However, vacancy of 23% was reported last year in urban housing built under the programme. In this article, Rohini Pande, contends that take-up can be increased if policies are designed in a way that allows the intended beneficiaries to preserve their social networks when they relocate.

We have passed a tipping point in the 21st century: today, a majority of the world’s population lives in cities, and the global urban population is on track to double by 2050.

In much of the developing world, the first residence for a migrant arriving in the city is in the slum. Life in slums is often squalid and fraught with significant health risks. The illegal nature of housing makes slum-dwellers susceptible to extortion by slumlords on one hand and government officers on the other. And the fact that slums are often located on prime real estate in the city centre compounds the problem: city governments lose out on significant revenues that they could otherwise redistribute to the poor.

Reflecting these realities, the agenda to “Make cities inclusive, safe, resilient and sustainable”, which was enshrined in the UN’s Sustainable Development Goal #11, was complemented in the October 2016 Habitat III summit in Quito, Ecuador by a “New Urban Agenda” of giving slum-dwellers upgraded housing with basic services by 2030.

How to accomplish such ambitious goals? A common approach is to build higher-quality, affordable housing for the poor on the city’s periphery. This is a central pillar of the Indian government’s housing initiative, the Pradhan Mantri Awas Yojana (PMAY), which aims to achieve “Housing for All by the year 2022”.

Yet, while the government sanctioned 1,347,000 houses under PMAY last year, a report in May put vacancy in urban housing built under PMAY at 23%. Why are slum dwellers and new urban migrants rejecting this housing?

One possibility is the lack of affordable housing finance. In his New Year Eve address to the nation, the Prime Minister announced two new interest-subsidy schemes under PMAY. And the 2017 Budget, which was announced on 1 February, raised PMAY’s allocation from Rs. 15,000 to Rs. 23,000 crore (US$2.2 billion to US$3.4 billion). Finance Minister Arun Jaitley used the opportunity to cite a benefit of demonetisation, saying that the increased liquidity in banks would allow them to reduce their lending rates, including those for housing.

But the reality is more complex. In my own research with Sharon Barnhardt of Flame University and Erica Field of Duke University, we tracked female beedi1 workers drawn from Ahmedabad’s slums who had entered a lottery to receive improved housing at far below market cost 7.5 miles from the city centre. In 2007, 14 years after lottery winners received their houses, we conducted detailed surveys with lottery participants.

Winning the housing lottery represented a financial windfall and a chance for home ownership in cleaner, safer environs. The monthly mortgage payments, which were guaranteed for 20 years, were roughly half the monthly rent that the lottery participants paid for their slum dwellings. Yet, 34% of winners chose not to move to the colony and a further 32% returned to the slums within 10 years.

Poor people were turning down an apparent golden opportunity, and it wasn’t because of high interest rates. What’s more, this group of participants represented a best-case scenario, compared to typical PMAY participants: beedi work is done at home, so at least one of the family’s earners didn’t face a long commute, and the participants themselves had advocated for the housing opportunity through SEWA, the Self Employed Women’s Association. In another housing complex in Ahmedabad – where houses were also assigned by lottery – we found that only 46% of the winners (or their relatives) were living in the units two and half years after winning the lottery.

Both qualitative and quantitative research pointed to the importance of social networks in the housing decisions of participants. Relative to lottery losers, the winners lived farther from their adult children and saw them less often. They reported feeling isolated, and were 6 to 9 percentage points less likely to know someone they could rely on for borrowing needs and had known such a person for nearly three fewer years, on average. Lottery losers, but not winners, reported receiving money through their social networks during hard times.

Researchers are increasingly recognising the importance of social networks – especially in the lives of women and the poor – and seeking out ways to bolster and broaden them. Slum-dwellers give each other material and psychological support along with informal insurance in ways that, for now, the State cannot provide.

Low take-up of PMAY housing suggests that the programme in its current form risks some of the same failures as the one we studied.

Studies of ‘Moving to Opportunity’ – a programme in the United States in the 1990s that gave lottery winners vouchers to move from high- to low-poverty neighbourhoods – provide another useful benchmark. These studies found no financial or employment benefits for participants or their adult children. Indeed, in our study we found that lottery winners were no better off on a variety of socioeconomic measures including income, labour force participation, household health, and child outcomes.

It may be that such benefits only materialise among those who relocated at an early enough age. A new study on ‘Moving to Opportunities’ uses tax data to show that while those who moved in adolescence showed negative effects, those who moved as children were more likely to attend university and less likely to end up a single parent.

All of this suggests a need to be more aware of what individuals stand to gain or lose through relocation, and how they will behave given those tradeoffs. Policies can be designed and tested to allow people to preserve their social networks even as they are relocated. One approach is to move entire communities to new developments, hence maintaining their social coherence. And another is to focus less on relocation and more on giving slum-dwellers rights and investing the gradual development of the slums themselves.

However, such approaches will require greater upfront investment by government, not in interest-rate subsidies, but in collecting data on the preferences of poor migrants, and targeting a smart programme at those who need and want it. The broad strokes the government is making – subsidies directed imprecisely toward poor and even middle-income recipients – may well lead to more unoccupied units in undesirable locales.

In some cases, local authorities have demolished slums and provided the residents with rental subsidies until PMAY housing can be built. If this continues, governments should be aware it is not just rickety structures falling under the bulldozer, but also strong and deeply beneficial social networks.